Problem 18-2A The comparative statements of Painter Tool Company are presented b
ID: 2472935 • Letter: P
Question
Problem 18-2A
The comparative statements of Painter Tool Company are presented below.
PAINTER TOOL COMPANY
Income Statement
For the Years Ended December 31
2017
2016
PAINTER TOOL COMPANY
Balance Sheets
December 31
Assets
2017
2016
Liabilities and Stockholders’ Equity
All sales were on account.
Compute the following ratios for 2017. (Weighted-average common shares in 2017 were 57,000.) (Round Earnings per share, Current ratio and Acid-test ratio to 2 decimal places, e.g. 1.65 or 1.65:1, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)
Explanation / Answer
a) Earnings per share => (Net Income - Preferred Dividends) / Outstanding Common Shares
=> 203000 - 0 / 57000
=> 3.56 per share
b) Return on common stockholders’ equity => Net Income / Average Common stockholder's equity
=> 203000 / (566700 + 465400 ) /2
=> 39.34%
c) Return on assets => Net Income / Average total Assets
=> 203000 / (970200 + 852800) /2
=> 22.27%
d) Current Ratio => current Assets / Current Liabilties
=> 369900 / 203500
=> 1.82 :1
e) Quick Ratio => (Cash + Marketable Securities + A/R ) / Current Liabilities
=> (60100 + 69000 + 107800) / 203500
=> 1.16:1
f) Accounts receivable turnover=> Net Annual Credit sales / ( Begg A/R + Ending A/R )/2
=> 1818500 / (102800 + 107800) /2
=> 17.27 Times
g) Inventory turnover => cost of goods sold / Average Inventory
=> 1011500 / (133000 + 115500) / 2
=> 8.12 times
h) Times interest earned => EBIT / Interets Expense
=> 308000 / 18000
=> 17.11 times
i) Asset turnover => Sales / Average Assets
=> 1818500 / (970200 + 852800) /2
=> 2 times
j) Debt to assets ratio => Total Liabilities / Total Assets
=> 403500 / 970200
=> 41.59%